Morningstar | Fidelity’s Growth Picks Up in First Quarter
Fidelity National Information Services’ top-line performance was a little better than expected, which somewhat eases fears about its lack of traction in terms of growth, and the company saw a solid improvement in margins. However, we would reiterate our concerns with the adjusted figures that management likes to use, and we don’t see anything in the quarter that materially alters our long-term view. We will maintain our $68 fair value estimate and narrow moat rating.On a GAAP basis, revenue declined slightly year over year, but the company saw 5% growth on an organic basis, with that growth weighted toward the Integrated Financial Solutions segment. Management attributed the strength on this side to a relatively high level of new clients onboarded. As a result, management modestly increased its revenue guidance for the year.
Adjusted EBITDA margins improved 130 basis points year over year to 35.4%. The company saw a similar improvement in GAAP operating income, suggesting the stronger organic growth is having a positive impact on profitability.
Management commented that its $43 billion deal to acquire Worldpay remains on track, and the company received an early termination of the waiting period from the Department of Justice. The deal is now expected to close in the third quarter. While we retain some concerns about the integration of such a large deal, the acquisition will likely raise the company’s long-term growth prospects, given that Worldpay generally enjoyed double-digit growth.
Fidelity National Information Services is a provider of technology solutions for merchants, banks, and capital markets firms globally. The company's solutions include merchant acquiring solutions; payment solutions; global eCommerce solutions; processing and ancillary applications solutions; digital solutions; fraud, risk management and compliance solutions; electronic funds transfer and network services solutions; card and retail payment solutions; wealth and retirement solutions; item processing and output services solutions; securities processing and finance solutions; global trading solutions; asset management and insurance solutions; and corporate liquidity solutions.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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